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Unformatted text preview: 15-3TESTING YOUR KNOWLEDGE15-1 Relevant costs and relevant revenues are the costs and revenues that adecision affects. They are future costs and revenues that will changeas a result of the decision.15-2 The activities that are necessary to carry out a decision cause allrelevant costs. Thus, only costs that are incurred as a result ofperforming these activities can be relevant. Since the decision mustbe made before the activities can be carried out, all costs incurred asa result of the activities must be future costs. Therefore, no costincurred prior to making the decision is relevant.15-3 A record of past costs can help managers predict what future costsmight be, and so is useful in predicting the relevant costs of adecision.15-4 Costs and revenues that are not relevant to a decision should beomitted from the analysis because they are not helpful in making the...
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This note was uploaded on 04/08/2008 for the course ACC 102 taught by Professor Drucker during the Fall '07 term at Coastal Carolina University.
- Fall '07